Reverse Mortgage Scams in California: Red Flags and How to Protect Yourself

California seniors with home equity are prime targets for financial fraud. Reverse mortgages, because they involve large amounts of home equity, attract a range of bad actors. Here’s how to spot reverse mortgage scams and protect yourself before signing anything.

Common Reverse Mortgage Scams in California

1. Contractor Scam (Home Improvement Fraud)

A contractor offers a “great deal” on home repairs and suggests using a reverse mortgage to pay for it. They either do substandard work, inflate costs, or disappear with the money. Red flag: any contractor who suggests or arranges your reverse mortgage for you.

2. Unsolicited Contact Scam

Someone calls, knocks on your door, or sends mail claiming to be from HUD or FHA offering a “free reverse mortgage.” HUD and FHA do not contact homeowners directly. These contacts are often scammers seeking your personal and financial information.

3. Deed Transfer Fraud

A “helper” asks you to sign over your deed as part of a reverse mortgage transaction. This is never legitimate. You should never transfer title to your home as a condition of getting a reverse mortgage. You stay on title.

4. Family Member Exploitation

Unfortunately, financial elder abuse often comes from family members — children or grandchildren who pressure seniors to take out a reverse mortgage and give them the proceeds. This is fraud and elder abuse under California law.

5. “We’ll Find You a Better Deal” Broker Scam

Someone charges large upfront fees to “shop” your reverse mortgage to lenders. HECM origination fees are federally capped — you should never pay large upfront fees before your loan closes.

Red Flags to Watch For

• Pressure to sign quickly — any legitimate lender will give you time to decide
• Unsolicited contacts claiming to be from government agencies
• Requests to transfer title or deed as part of the loan process
• Promises that seem too good to be true
• Requests for large upfront fees before loan approval
• Third parties (contractors, financial advisors) who arrange the reverse mortgage for you

California Protections Against Reverse Mortgage Scams

• Mandatory independent counseling — HUD requires counseling from an independent, non-lender counselor
• 7-day cooling-off period — California requires 7 days after counseling before any application or fees
• 3-day right of rescission — federal law gives you 3 business days after closing to cancel
• California Elder Abuse Laws — financial elder abuse is a crime with civil and criminal penalties

If You Suspect a Scam

• California Attorney General’s Office: 1-800-952-5225
• HUD Housing Counseling Hotline: 1-800-569-4287
• California Department of Financial Protection and Innovation (DFPI): dfpi.ca.gov
• Adult Protective Services (if elder abuse): 1-833-401-0832

Related: California Reverse Mortgage Guide | Pros and Cons | Counseling Requirement